The Securities and Exchange Board of India (SEBI) has revised nomination rules for demat accounts and mutual fund folios, introducing a simplified framework that aims to make investing easier while addressing the growing issue of unclaimed financial assets. Under the new rules, investors opening single-holder demat accounts or mutual fund folios from September 1, 2026, will be required to either nominate a beneficiary or formally opt out through a declaration.

The regulator said the changes are intended to improve investor convenience, streamline nomination procedures and ensure smoother transmission of investments to legal heirs in the event of an investor's death.

Mandatory nomination or Opt-Out

One of the most significant changes is that nomination will effectively become mandatory for all new single-holder demat accounts and mutual fund folios opened after September 1. Investors who do not wish to nominate anyone must explicitly submit an opt-out declaration.

For jointly held accounts and mutual fund folios, however, nomination will remain optional. SEBI has retained flexibility for joint investors while strengthening safeguards for individual account holders.

The move follows feedback from market participants on nomination rules introduced earlier, with industry stakeholders seeking a more practical and investor-friendly framework.

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Nomination process

SEBI has substantially reduced the information required while filing a nomination.

Under the revised framework, only the nominee's name and relationship with the investor will be mandatory. If the nominee is a minor, the date of birth must also be provided.

Information such as PAN, Aadhaar, passport details, email address, mobile number and other identification documents will be optional. Investors can appoint up to three nominees for a demat account or mutual fund folio.

The regulator has also clarified that if multiple nominees are registered but the investor does not specify the percentage allocation, the holdings will automatically be distributed equally among all nominees.

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Witness requirement

In another investor-friendly change, SEBI has removed the requirement for a witness signature on nomination forms submitted with a regular signature.

A witness will now be required only when an investor uses a thumb impression instead of a signature. The change is expected to reduce paperwork and simplify account-opening procedures.

More digital options

To encourage seamless digital onboarding, SEBI has expanded the methods through which investors can submit nominations online.

Investors can now complete the process using a digital signature certificate, Aadhaar-based e-sign, recognised electronic signature facilities or two-factor authentication through a one-time password sent to their registered mobile number and email address.

Depositories, depository participants, mutual fund registrars and asset management companies have been directed to offer both online and offline nomination facilities.

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Unclaimed assets

A key objective behind the revised rules is to reduce the accumulation of unclaimed securities and mutual fund holdings.

SEBI has instructed intermediaries to send SMS and email reminders twice a year to investors who have neither registered a nominee nor formally opted out. In addition, online investment platforms will display pop-up messages explaining the benefits of nomination whenever such investors log into their accounts.

The regulator believes these measures will help ensure that financial assets are transferred smoothly to nominees or legal heirs rather than remaining unclaimed for years.

The revised framework also allows investors to modify, update or cancel nominations any number of times. SEBI said the new rules supersede earlier nomination-related circulars and will take effect from September 1, 2026, giving market intermediaries time to update their systems and processes.

With simpler documentation, enhanced digital options and a stronger focus on investor protection, the revised nomination framework is expected to make succession planning easier for millions of demat account holders and mutual fund investors.

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